WEBVTT - FTX Shows Crypto Still the ‘Wild West’ 0:00:13.920 --> 0:00:17.440 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.600 --> 0:00:19.680 My name is Mike Reagan. I'm a senior editor at 0:00:19.680 --> 0:00:23.000 Bloomberg and i'm Data higher Across Asset reporter with Bloomberg. 0:00:23.440 --> 0:00:26.160 This week on the show, Well, just when it looked 0:00:26.160 --> 0:00:29.280 like the crypto market had stabilized following the massive blow 0:00:29.400 --> 0:00:32.720 up of the Terra ecosystem earlier this year, here comes 0:00:32.760 --> 0:00:36.680 another big blow up, this one arguably more surprising and 0:00:36.800 --> 0:00:42.080 even more systemically important to the whole industry. Sam Bakman 0:00:42.159 --> 0:00:45.680 Fried's FTX Exchange. Now, before this, he and his firm 0:00:45.840 --> 0:00:48.800 were long considered one of the most stable cornerstones of 0:00:48.800 --> 0:00:51.920 the industry, with the third year old billionaire known as 0:00:52.040 --> 0:00:55.600 FBF even being described as the JP Morgan or Warren 0:00:55.640 --> 0:00:59.520 Buffett of digital assets. Even if you've never even dabbled 0:00:59.600 --> 0:01:01.840 in cry though you've probably watched f t X is 0:01:01.880 --> 0:01:05.200 funny Super Bowl ad with Larry David, we're seeing FBF 0:01:05.240 --> 0:01:08.080 paddling around with Tom Brady, or maybe you noticed the 0:01:08.120 --> 0:01:10.960 f t X logo on the chest of Major League umpires. 0:01:12.040 --> 0:01:14.280 So what does it mean for the market when such 0:01:14.319 --> 0:01:18.039 a high profile pillar of the industry collapses in a 0:01:18.080 --> 0:01:20.800 matter of days. We'll get into it with the chief 0:01:20.840 --> 0:01:24.520 executive and the chief investment officer of a quantitative crypto 0:01:24.640 --> 0:01:28.480 hedge fund. But first, fil Donna. You know before every 0:01:28.520 --> 0:01:32.720 podcast you write down like forty seven questions to ask. 0:01:33.040 --> 0:01:35.640 I have so many, so many questions. Now we had 0:01:35.720 --> 0:01:38.760 we actually had SPF himself on this podcast, and I 0:01:38.840 --> 0:01:42.240 noticed you never asked him like, hey, SPF, when's your 0:01:42.280 --> 0:01:44.360 thing going to blow up? Well? That but that's the 0:01:44.440 --> 0:01:47.360 thing about his whole company is that everybody thought they 0:01:47.360 --> 0:01:49.120 were going to be I mean, they were like the 0:01:49.120 --> 0:01:52.440 gold Star right. And I'll confess I had a do 0:01:52.640 --> 0:01:56.240 quan on the podcast one week when it did not 0:01:56.280 --> 0:01:59.040 occur to me to ask him, when's your thing going 0:01:59.080 --> 0:02:02.120 to blow up? Hopefully no more blow ups. I'm blushed. 0:02:02.920 --> 0:02:05.320 People can't see me, but I'm blushing. But you know what, 0:02:05.480 --> 0:02:08.960 the thing is, in crisis, there's opportunity when stuff blows up. 0:02:09.680 --> 0:02:12.640 Sometimes traders make the most of it. Yes, I do 0:02:12.720 --> 0:02:14.400 want to bring in our guests. This is the perfect 0:02:14.400 --> 0:02:16.200 week for us to be talking to them. I'm really 0:02:16.240 --> 0:02:18.680 excited to have them on. We have Sadie Rainey. She's 0:02:18.680 --> 0:02:22.240 a co founder and CEO of Stricks Leviathan and Nico Cordero, 0:02:22.360 --> 0:02:24.679 he's a ce IO at the company. Welcome to both 0:02:24.680 --> 0:02:26.679 of you, and thanks so much for joining us on 0:02:26.840 --> 0:02:29.079 this week's show. Thanks for having us. It's really nice 0:02:29.080 --> 0:02:32.359 to be here. Despite this week likewise, great to be here. 0:02:33.160 --> 0:02:35.639 It's definitely a rough week, and I do want to 0:02:35.680 --> 0:02:39.160 get into um all about you guys, and um what 0:02:39.240 --> 0:02:41.639 you do and how you're faring and what this week 0:02:41.680 --> 0:02:44.080 has like has been like for for both of you 0:02:44.120 --> 0:02:46.400 and for your teams. But maybe Sadie, we just start 0:02:46.560 --> 0:02:48.919 start with you and and I'm hoping you can just 0:02:49.000 --> 0:02:52.840 lay out for our audience what exactly happened this week? 0:02:53.720 --> 0:02:56.720 What were some of the major factors the major players involved. 0:02:58.760 --> 0:03:02.000 So great question. I think that's actually the question that 0:03:02.040 --> 0:03:05.520 everybody's trying to figure out right now. What what did 0:03:05.600 --> 0:03:09.079 happen or what is happening? And the big big issue 0:03:09.080 --> 0:03:11.320 here is really I don't think we have all the 0:03:11.360 --> 0:03:15.919 pieces of of information. And really it started at the 0:03:16.040 --> 0:03:19.960 end of last week when there was some back and 0:03:20.000 --> 0:03:24.760 forth between Finance and f t X on Twitter. You know, 0:03:24.880 --> 0:03:28.360 there was a lot of I guess allegations going around, 0:03:28.600 --> 0:03:31.680 which there was an immediate response from f t x um, 0:03:31.720 --> 0:03:34.880 you know, kind of that everything's fine, We're all fine, um. 0:03:34.960 --> 0:03:37.640 And then suddenly, you know, there was very clear signs 0:03:37.680 --> 0:03:40.560 of distress um for f t X in the market, 0:03:41.200 --> 0:03:46.200 and Finance came forward with an offer to acquire or 0:03:46.320 --> 0:03:49.320 bail out f t X more or less, which was 0:03:49.480 --> 0:03:54.480 very quickly rescinded um. And in that whole process there 0:03:54.600 --> 0:03:58.600 was a large run on f t x um which 0:03:58.680 --> 0:04:03.800 dried up their liquidity, leading to them freezing withdrawals. And 0:04:03.840 --> 0:04:07.440 now there is a very aggressive attempt by f t 0:04:07.720 --> 0:04:12.320 X too finds a solution to their liquidity so that 0:04:12.400 --> 0:04:16.440 they can make their investors whole. You know. Also, if 0:04:16.560 --> 0:04:19.680 i'd be curious if did this catch you guys as 0:04:19.760 --> 0:04:22.280 much of a surprise as it did the rest of us. Yeah, 0:04:22.320 --> 0:04:24.200 it did to be frank, I mean, the speed of 0:04:24.279 --> 0:04:27.640 which we turned from you know, small rumors on the 0:04:27.680 --> 0:04:30.080 internet that didn't seem to have validity into f t 0:04:30.360 --> 0:04:32.839 X freezing accounts was all in a span of about 0:04:32.839 --> 0:04:36.200 thirty six hours. And like you mentioned in the opening, 0:04:36.520 --> 0:04:40.160 you know, f t X was largely considered the most 0:04:40.200 --> 0:04:44.040 trustworthy institutional player in the space outside of the us 0:04:44.680 --> 0:04:47.800 UM so not including coin base and others. Um, so, yeah, 0:04:47.800 --> 0:04:50.000 I think it was. It was. It was quite a shock, um, 0:04:50.000 --> 0:04:54.679 and a lot of folks are surprised and angry rightfully. So, yeah, Nicole, 0:04:54.680 --> 0:04:58.919 I imagine it's and and city. I imagine it's impossible 0:04:58.960 --> 0:05:02.400 to run a crypto hedge fund without having some sort 0:05:02.400 --> 0:05:04.800 of exposure to ft X, you know, either as a 0:05:04.800 --> 0:05:07.440 client or counterparty in some ways. It is it creating 0:05:07.480 --> 0:05:12.680 any issues for you guys, Yeah, I mean it is 0:05:12.680 --> 0:05:15.080 difficult to not have exposure to them, you know, within 0:05:15.120 --> 0:05:17.360 the US. You know, preferably we'd like to keep our 0:05:17.400 --> 0:05:20.440 capital in the US under US regulated exchanges. But if 0:05:20.440 --> 0:05:25.240 you want access to derivatives, perpetual futures and capital efficiency 0:05:25.360 --> 0:05:28.440 through the type of instruments that are offered offshore, you like, 0:05:28.520 --> 0:05:30.280 you have to be off shore, you know. So we 0:05:30.279 --> 0:05:32.039 were there. We're a counter party to them. We do 0:05:32.120 --> 0:05:35.000 have some funds frozen there. It's not the best of situations, 0:05:35.000 --> 0:05:37.760 but luckily for us, we are, you know, place a 0:05:37.839 --> 0:05:40.760 large emphasis emphasis on risk management, and so we only 0:05:40.760 --> 0:05:44.560 had a small portion of our portfolio allocated there, simply 0:05:44.600 --> 0:05:47.719 because this space is the wild West, and you know, 0:05:47.800 --> 0:05:50.120 you expect these things that happened just not to ft 0:05:50.360 --> 0:05:54.599 X any communications or indications of of one n F 0:05:54.640 --> 0:05:58.520 you'll be able to withdraw funds. At this time, it's 0:05:58.520 --> 0:06:01.080 a very fluid situation. We're not sure you know what's 0:06:01.080 --> 0:06:03.960 happening behind the scenes. And Sady, maybe you can talk 0:06:03.960 --> 0:06:07.280 about just the significance of the events, because we've been 0:06:07.360 --> 0:06:09.280 we've been talking about how it's been a rough week. 0:06:09.320 --> 0:06:12.760 Obviously crypto markets tanked at one point during the week 0:06:13.080 --> 0:06:16.600 it seemed like the horrible sentiment from crypto also had 0:06:16.640 --> 0:06:19.840 spilled over into the equity space where we saw the 0:06:20.000 --> 0:06:23.640 SMP five hundred also selling off. Just what is the significance, Like, 0:06:23.680 --> 0:06:28.280 how momentous of what unfolded over the past couple of days. 0:06:28.279 --> 0:06:32.839 How momentous is it? It's really momentous in this situation. 0:06:33.320 --> 0:06:36.359 You know, we've been through a number of market crashes 0:06:36.600 --> 0:06:40.200 and you know, in the past have also traded with Voyager, 0:06:40.480 --> 0:06:42.960 or we've used Voyager, not for trading, but we've used 0:06:43.000 --> 0:06:45.719 Voyager in the past. We also use block Fire, and 0:06:45.920 --> 0:06:49.960 when there were some indicators that maybe there they were 0:06:50.160 --> 0:06:52.760 I guess you could say over over their skis um, 0:06:52.880 --> 0:06:56.720 we stopped trading with them, you know, well ahead of 0:06:56.720 --> 0:07:00.920 of what happened last spring, and this one I don't 0:07:00.960 --> 0:07:04.080 think anyone saw coming. You know, it was really quick 0:07:04.240 --> 0:07:07.520 how it happened. It was really fast. And I was 0:07:07.560 --> 0:07:10.280 actually speaking at coin al It's last week up in 0:07:10.320 --> 0:07:14.120 San Francisco on Thursday, ironically, and one of the topics 0:07:14.120 --> 0:07:17.040 I too talked about was risk and how you know, 0:07:17.440 --> 0:07:20.600 the reason people love this industry is because the crazy 0:07:20.640 --> 0:07:22.520 returns you can get, but you know, you pay for 0:07:22.560 --> 0:07:27.280 that with with risk, and you have risk across every avenue, 0:07:27.480 --> 0:07:30.400 and counterparty risk is just one of those risks. So 0:07:30.520 --> 0:07:32.800 you really have to make sure that you're looking at, 0:07:33.480 --> 0:07:36.280 you know, all the areas out there, um, and you're 0:07:36.320 --> 0:07:40.440 never literally putting your eggs in one basket because you 0:07:40.480 --> 0:07:44.320 can never be sure at this stage that everything is 0:07:44.360 --> 0:07:46.520 what it what it looks like it is on face value. 0:07:47.400 --> 0:07:50.640 Was it also much more shocking considering that we basically 0:07:50.680 --> 0:07:55.000 had like weeks or even months of a very I 0:07:55.040 --> 0:07:57.200 guess we could call it a calm market where we 0:07:57.320 --> 0:08:00.200 really didn't see prices searching or plunging in any way, 0:08:00.240 --> 0:08:03.720 but just like meandering for a really long time. Yeah, 0:08:03.840 --> 0:08:07.520 I mean that's exactly correct. I mean, from the outside 0:08:07.560 --> 0:08:10.280 looking in, it looked like crypto was stabilizing, has sort 0:08:10.280 --> 0:08:14.400 of forming a foundation from which to find strength after 0:08:14.520 --> 0:08:17.920 the chaos of May and June um and things were 0:08:17.920 --> 0:08:20.320 starting to trend, you know, upwards again. Things you're starting 0:08:20.360 --> 0:08:22.600 to look um like crypto used to look in the 0:08:22.600 --> 0:08:26.880 early bowl markets. And then obviously everyone was sidewiped by 0:08:26.920 --> 0:08:30.120 this revelation that you know, very few if anyone, saw coming, 0:08:30.840 --> 0:08:32.880 you know, city, I know sort of one of the 0:08:32.880 --> 0:08:35.920 appeals of quant investing is that, you know, you let 0:08:35.920 --> 0:08:37.559 the math do the work and you sort of take 0:08:37.600 --> 0:08:41.120 out the human emotion of things. So this strikes me 0:08:41.160 --> 0:08:45.000 as something that you know, even a quant strategy is 0:08:45.000 --> 0:08:46.920 going to struggle with just such an out of the 0:08:46.920 --> 0:08:49.840 blue occurrence. So I'm curious if you could talk about 0:08:49.880 --> 0:08:52.120 some of your strategies. Um, I know, you have a 0:08:52.120 --> 0:08:55.120 market neutral strategy that in theory, you know, should be 0:08:55.120 --> 0:08:57.920 able to weather a type of collapse in prices like 0:08:57.960 --> 0:09:01.240 this better than a sort of on only or levered 0:09:01.280 --> 0:09:05.679 up long strategy. How does this type of event affect 0:09:05.720 --> 0:09:08.360 a quant um is it is it the type of 0:09:08.400 --> 0:09:12.120 thing that you're just you know, as clueless as everyone else, 0:09:12.200 --> 0:09:14.640 or is you know, is there something about being a 0:09:14.720 --> 0:09:17.679 quant in the space that allows you to navigate it 0:09:17.720 --> 0:09:22.480 a little better. Uh. In general, yes, we I definitely 0:09:22.520 --> 0:09:25.480 believe we can navigate a lot of these incidents much 0:09:25.960 --> 0:09:29.600 more efficiently than than a lot of our I guess 0:09:29.640 --> 0:09:33.040 a lot of our comrades out there. But really, you know, 0:09:33.480 --> 0:09:37.280 quant is non human. Uh. You know, it's it's looking 0:09:37.320 --> 0:09:40.480 at the data, it's it's trusting the data. And but 0:09:40.600 --> 0:09:44.719 you have to set up your system with a very 0:09:44.960 --> 0:09:48.680 risk oriented mentality. So you have to you have, the 0:09:48.720 --> 0:09:51.240 computer can can only be as good as as you 0:09:51.320 --> 0:09:53.640 let it be in those situations. And you can't just 0:09:53.679 --> 0:09:56.680 listen to everything that your your signals say. You know, 0:09:56.720 --> 0:09:58.719 you have to set it up so that you are 0:09:58.800 --> 0:10:01.839 mitigating risk. Do you always have to have multiple counterparties 0:10:01.840 --> 0:10:04.480 in these this industry, you can't. You can't trade with 0:10:04.640 --> 0:10:06.840 just one one place. You also have to make sure 0:10:06.880 --> 0:10:10.000 that you have you know, we set maximums for any 0:10:10.040 --> 0:10:13.360 one counterparty. Um. So even though prices might be the 0:10:13.400 --> 0:10:16.760 best in trading, might be might be the most profitable 0:10:16.800 --> 0:10:19.840 with one exchange, We're not going to put eight of 0:10:19.840 --> 0:10:22.200 our funds there. We just we just won't. We're not 0:10:22.240 --> 0:10:24.400 willing to do that. And you know, so our portfolio 0:10:24.520 --> 0:10:29.679 has limits per per trading partner, it has overall limits 0:10:29.720 --> 0:10:31.959 for signals. You know, we are a long short fund 0:10:31.960 --> 0:10:34.520 and our main fund, our system will only go to 0:10:34.559 --> 0:10:37.840 a certain percentage short, so you know, it doesn't matter 0:10:37.840 --> 0:10:40.240 what the market looks like UM, and if all of 0:10:40.240 --> 0:10:42.200 our signals wanted to short it, we still wouldn't short. 0:10:42.240 --> 0:10:45.320 We'd only shot up to UM the threshold percentage. So 0:10:46.080 --> 0:10:48.640 you know, you have to really make sure that your 0:10:48.840 --> 0:10:51.240 guard rails are set in place for for a quant fund. 0:10:51.400 --> 0:10:54.240 And then you know, having different strategies definitely helps. Having 0:10:54.240 --> 0:10:58.040 a market neutral d FI fund helps in this situation. Having, 0:10:58.960 --> 0:11:02.520 you know, our d FI fund was you know, has 0:11:02.679 --> 0:11:05.520 you know so far been completely unaffected by this because 0:11:05.640 --> 0:11:10.640 it's self custodied UM using decentralized exchanges, so we don't 0:11:10.679 --> 0:11:16.120 have the centralized party risk of somebody mishandling our our 0:11:16.160 --> 0:11:20.680 funds without us knowing it. So the system, though again 0:11:20.840 --> 0:11:23.120 I'm just being repetitive, but the system is only as 0:11:23.120 --> 0:11:25.400 good as as what you train it to be. I'm 0:11:25.440 --> 0:11:27.440 sure you guys don't want to sort of give up 0:11:27.480 --> 0:11:30.040 the ingredients of the secret sauce or anything, but I'm 0:11:30.080 --> 0:11:32.800 curious what sort of some of the main elements are 0:11:32.960 --> 0:11:36.480 of your strategies and I'm guessing trend following and momentum 0:11:36.520 --> 0:11:41.480 plays a big role. Yeah, and the flagship funds, you know, 0:11:41.559 --> 0:11:44.559 that's trects. We have systematic in nature, takes direction or 0:11:44.600 --> 0:11:46.480 exposure both on the lawn and short side. We have 0:11:46.520 --> 0:11:51.800 a mixture of trend momentum, cross sectional momentum us really 0:11:51.840 --> 0:11:54.080 plain relative value across the assets that we trade, as 0:11:54.080 --> 0:11:57.440 well as some idiosyncratic signals that are that we found 0:11:57.800 --> 0:12:01.280 about unique market structure within crypto. UM you know, would 0:12:01.360 --> 0:12:03.720 pick up the bulk of the of the systematic fund 0:12:03.760 --> 0:12:05.760 and then on the market neutral with DeFi yield funds. 0:12:06.120 --> 0:12:09.480 You know, that's largely driven by yield opportunities with a 0:12:09.600 --> 0:12:12.319 with a heavy risk overlay being able to hedge out, 0:12:12.559 --> 0:12:15.280 you know, crypto data exposure in uh you know, a 0:12:15.360 --> 0:12:17.960 crypto native way entirely on chain without having to interact 0:12:17.960 --> 0:12:20.840 with centralized counterparties. So, Nico, can you actually talk more 0:12:20.840 --> 0:12:23.600 about your market neutral fund, because this is something I 0:12:23.640 --> 0:12:27.240 had been writing about over the summer when UM well 0:12:27.280 --> 0:12:29.679 and also earlier in the year we had crypto prices 0:12:29.720 --> 0:12:33.359 crashing in May and June and what market neutral strategies 0:12:33.400 --> 0:12:36.679 do is they tend to hold up better during those times. Right, 0:12:36.720 --> 0:12:38.480 So maybe can you just lay out for our audience 0:12:38.720 --> 0:12:41.400 what is the market neutral strategy and how is it 0:12:41.440 --> 0:12:46.480 faring on during weeks like the one we just had. Yeah, 0:12:46.480 --> 0:12:50.000 so market neutral in this sense is we have some 0:12:50.720 --> 0:12:54.960 exposure to crypto price movement through the assets that we're 0:12:55.000 --> 0:12:59.040 holding within a variety of decentralized that change and other 0:12:59.640 --> 0:13:04.560 defy protocols. But then we utilize hedging strategies to net 0:13:04.559 --> 0:13:07.600 out that price exposure. UM. So that way, you know, 0:13:07.640 --> 0:13:11.480 if ethereum goes up, um, you know, our long holdings 0:13:11.480 --> 0:13:15.359 and ethereum go also go up, but are short exposure 0:13:15.360 --> 0:13:17.880 goes down and it kind of nets out. There's more 0:13:17.880 --> 0:13:20.360 to it than that, you know, it requires real time 0:13:20.400 --> 0:13:23.600 rebalancing to account for impermanent loss and and other issues 0:13:23.600 --> 0:13:26.440 that arise onto centralized of changes. But in a nutshell, 0:13:26.480 --> 0:13:36.480 that's how it works. So does this event this week? 0:13:37.120 --> 0:13:40.280 Will it change your strategies going forward? Change the way 0:13:40.320 --> 0:13:42.080 you do business? You know, it sounds like in a 0:13:42.120 --> 0:13:45.080 way you were, you know, sort of prepared for something 0:13:45.120 --> 0:13:48.120 like this to happen, you know, limiting your counterparty exposure 0:13:48.120 --> 0:13:49.920 and that sort of thing. But what's is there a 0:13:49.960 --> 0:13:52.800 lesson learned that that you'll carry for forward from this 0:13:52.880 --> 0:13:56.880 week's events. I mean, for one, we'll probably reduce our 0:13:57.480 --> 0:14:01.160 individual exposure anyone counterparty even more. Um. It gets difficult 0:14:01.160 --> 0:14:03.720 because there are not a lot of large exchanges with 0:14:03.760 --> 0:14:06.160 good liquidity that you can trust. And then we've also 0:14:06.400 --> 0:14:10.240 started the very initial conversations of like around okay, do 0:14:10.280 --> 0:14:14.000 we take our flagship fund and only interact on decentralized 0:14:14.760 --> 0:14:18.560 options uh to to mitigate the central the centralized counter 0:14:18.600 --> 0:14:21.600 party risk. Um. So that's early stage discussion. But because 0:14:21.640 --> 0:14:23.800 we run the market neutral DE five fund, we have 0:14:23.840 --> 0:14:26.960 all the technical infrastructure in place too, self custody our 0:14:27.000 --> 0:14:30.400 flagship fund and you know, only interact on uh, you know, 0:14:30.440 --> 0:14:34.480 on chain and Sadie, maybe you can just, um just 0:14:34.520 --> 0:14:37.360 to go back to the basics, basically, tell us more 0:14:37.400 --> 0:14:42.160 about you guys company, how you got interested in crypto, 0:14:42.400 --> 0:14:45.360 and maybe you can even fold in a bit about 0:14:45.400 --> 0:14:48.080 your background and Nicho's background, because you guys both have 0:14:48.440 --> 0:14:51.640 very interesting, um sort of past lives before your your 0:14:51.680 --> 0:14:55.480 crypto lives. Sure happy to kind of give a little 0:14:55.480 --> 0:14:58.520 more color about our background. Um So I'm the co 0:14:58.640 --> 0:15:02.640 founder of strict Slevive and and UM originally founded the 0:15:02.640 --> 0:15:07.120 company with Jesse Proudman about five years ago. And I 0:15:07.160 --> 0:15:10.480 met Jesse when I went to work UM for him 0:15:10.560 --> 0:15:14.280 at his last startup, UM, which was a private cloud company. 0:15:14.320 --> 0:15:18.080 I was financial controller there. That company was acquired by 0:15:18.080 --> 0:15:22.880 IBM in so I stayed on led the integration of 0:15:22.920 --> 0:15:27.480 the accounting and finance operations teams into Big Blue. Didn't 0:15:27.760 --> 0:15:31.560 really love UM going into a three sixty thou person 0:15:31.640 --> 0:15:36.320 company after being in a sixty person startup. And Jesse 0:15:36.560 --> 0:15:40.080 was a distinguished engineer at IBM, so he UM. You know, 0:15:40.200 --> 0:15:43.480 he ended up in their blockchain group and really fell 0:15:43.520 --> 0:15:48.080 down the crypto rabbit hole, as we all do. We'd 0:15:48.080 --> 0:15:50.400 stay good friends. So I knew he was getting more 0:15:50.440 --> 0:15:53.440 and more into crypto and you know, dabbling and mining 0:15:53.520 --> 0:15:58.880 and trading UM, but then really really got passionate about 0:15:58.880 --> 0:16:03.480 trading and from as a technologist, felt like that was 0:16:03.520 --> 0:16:07.160 a huge opportunity UM. So approached me towards the end 0:16:07.200 --> 0:16:11.920 of seventeen and said, hey, I've got this business idea. UM, 0:16:11.960 --> 0:16:13.880 what do you think You knew that we needed to 0:16:13.920 --> 0:16:16.520 have structure and operations and legal and compliance. But that's 0:16:16.560 --> 0:16:19.840 all stuff that he finds UM as exciting as watching 0:16:19.920 --> 0:16:23.200 paint dry. So he's like, hey, can you know, do 0:16:23.200 --> 0:16:24.720 you want to do this? I know that's kind of 0:16:24.760 --> 0:16:28.440 your wheelhouse. So that's how we started. I was really 0:16:29.040 --> 0:16:33.960 looking at trading in the space and you know, individually trading. 0:16:33.960 --> 0:16:36.200 Back at that point in time in crypto, it was 0:16:36.240 --> 0:16:41.200 impossible to capture any kind of UM gains efficiently. You know, 0:16:41.240 --> 0:16:44.760 you could see the price discrepancies across different exchanges, but 0:16:45.200 --> 0:16:48.800 by the time you could actually execute a trade, there 0:16:48.880 --> 0:16:51.440 was no profit left in it. You know, you couldn't 0:16:51.440 --> 0:16:53.240 trade by a p I or if you did trade 0:16:53.240 --> 0:16:56.360 by a PI, you know, trades were dropped or double filled, 0:16:56.520 --> 0:16:58.640 or would look like they weren't filled, and then two 0:16:58.720 --> 0:17:02.440 days later they'd show up as completed. And so it was. 0:17:02.600 --> 0:17:05.879 It was just super inefficient. So UM we started a 0:17:05.960 --> 0:17:09.280 launch of fund um with actually Jesse as the main 0:17:09.359 --> 0:17:13.160 investor to start and some of his friends and then 0:17:13.760 --> 0:17:17.440 m built the trading technology at the same time. UM 0:17:17.640 --> 0:17:21.320 launched the fund, the first fund in April ofen and 0:17:21.359 --> 0:17:25.000 by then realized that our technology was just as valuable 0:17:25.280 --> 0:17:30.800 UM as as our fund methodology was. So UM and 0:17:30.880 --> 0:17:33.159 stepping back a little bit. After we we formed the 0:17:33.160 --> 0:17:37.119 company officially in January, we realized we needed somebody with 0:17:38.160 --> 0:17:42.200 much deeper finance UM skill set than we had. So 0:17:43.200 --> 0:17:47.200 that's where we were introduced through a friend to Nico 0:17:47.440 --> 0:17:49.840 and it was you know, it was as soon as 0:17:49.880 --> 0:17:52.640 we met Nico, we we knew like, this is this 0:17:52.680 --> 0:17:54.640 is the person that we're going to grow this company with. 0:17:54.800 --> 0:17:58.520 So um he joined really early on as well. So 0:17:58.720 --> 0:18:02.639 when you know, when we went live and April and 0:18:02.640 --> 0:18:05.320 bought our first bitcoin, which the price at that point 0:18:05.320 --> 0:18:09.800 in time was nine thousand dollars UM thereabouts. UM, you know, 0:18:10.000 --> 0:18:12.560 Nico was there placed our first trade. So it's been 0:18:12.960 --> 0:18:17.160 pretty awesome to have him at the Helm since then. Yeah, Nico, 0:18:17.160 --> 0:18:18.719 why don't you why don't you take it from there? 0:18:18.760 --> 0:18:20.600 How did you end up in this rabbit hole? Uh? 0:18:22.119 --> 0:18:25.680 What's your what's your back story? Yeah? Absolutely, um, so high. 0:18:25.680 --> 0:18:27.520 I ended up in the rabbit hole of crypto as 0:18:27.520 --> 0:18:29.720 I used to be in the U. S. Military spense 0:18:29.760 --> 0:18:32.600 of time over in Iraq and Afghanistan. Um it was 0:18:33.800 --> 0:18:35.560 around two thousand and ten. I think it was the 0:18:35.600 --> 0:18:38.280 first time I read about bitcoin. UM. I did not 0:18:38.320 --> 0:18:40.240 put everything I had into it, or I'd be retired 0:18:40.240 --> 0:18:43.640 on an island right now. But I was entirely fascinated 0:18:43.680 --> 0:18:48.280 by this concept of decentralized currency that had no intermediaries 0:18:48.280 --> 0:18:50.640 and no overarching control. I mean, it was very hard 0:18:50.680 --> 0:18:53.280 to sit in Iraq and looking around at the you know, 0:18:53.359 --> 0:18:55.520 the complete collapse of their infrastructure and not see the 0:18:55.560 --> 0:18:58.360 value add um, which is not as easily visible from 0:18:58.359 --> 0:18:59.720 the streets of the US where we don't have to 0:18:59.720 --> 0:19:03.520 worry about those things. Yeah, what I'd like to rewind 0:19:03.520 --> 0:19:05.560 a little bit and get back to the idea of 0:19:05.680 --> 0:19:08.880 defy um. You know, as you point out UM, I 0:19:08.960 --> 0:19:11.720 feel like defy has a bit of a told you 0:19:11.800 --> 0:19:15.880 so a moment right now after what happens to a centralized, 0:19:16.800 --> 0:19:20.639 huge important player like f t x UM. So I'm curious, 0:19:20.640 --> 0:19:24.240 where are the opportunities in defy that are most exciting 0:19:24.359 --> 0:19:26.199 to you guys, and especially in the you know, the 0:19:26.240 --> 0:19:28.919 notion of yield farming. I feel like that seemed to 0:19:28.920 --> 0:19:32.199 get pretty toxic after the collapse of of Terra and 0:19:32.280 --> 0:19:36.679 it's it's anchor program. UM. So what you know, is 0:19:36.760 --> 0:19:40.200 yield farming too risky these days? Or or there or 0:19:40.240 --> 0:19:43.600 their places where you know, it's still attractive. Uh and 0:19:43.600 --> 0:19:45.600 and sort of what projects what you know? Are you 0:19:45.640 --> 0:19:49.600 are you finding the opportunities in these days? Yeah, definitely, 0:19:49.600 --> 0:19:52.560 hadn't I told you moment here, Kase. Everybody who operates 0:19:52.560 --> 0:19:55.080 on de FI is sitting with their own capital, in 0:19:55.119 --> 0:19:58.560 their own self custodied wallets and not worrying about some 0:19:58.640 --> 0:20:01.320 third party stirring off the their funds um and do 0:20:01.359 --> 0:20:03.560 any illicit things with it. Um. So definitely, and I 0:20:03.600 --> 0:20:05.639 told you so a moment. In terms of your farming, 0:20:05.680 --> 0:20:08.400 there's still plenty of opportunities out there. I mean, this 0:20:08.520 --> 0:20:11.400 is we're very early stages. I know at this point. 0:20:11.400 --> 0:20:14.240 You know, Bitcoin has been around for you know, it's 0:20:14.400 --> 0:20:17.000 it's been almost thirteen years now since the White paper 0:20:17.040 --> 0:20:20.640 originally came out, But all of these additional use cases 0:20:20.680 --> 0:20:23.520 around the centralized finances are still in their infancy. So 0:20:24.040 --> 0:20:26.240 you know, if the trillions of dollars of global economy, 0:20:26.240 --> 0:20:28.080 even if it captures one percent of it, you know, 0:20:28.119 --> 0:20:31.480 the opportunity is still quite massive. Um. And so the 0:20:31.520 --> 0:20:35.400 opportunity still remains, and we're still pretty bullish on it. Nico. 0:20:35.520 --> 0:20:37.000 Can you talk a little bit more about what you 0:20:37.040 --> 0:20:40.200 guys are doing right now? Maybe you can give us 0:20:40.240 --> 0:20:42.520 just a bit more specifics. I know, and the notes 0:20:42.600 --> 0:20:45.520 you had sent to us, which granted you sent before 0:20:45.560 --> 0:20:49.000 everything happened, but you said that there are potentially some 0:20:49.080 --> 0:20:51.439 areas in the space that are undervalued. So can you 0:20:51.520 --> 0:20:54.320 just tell us a bit more about that from an 0:20:54.359 --> 0:20:58.040 undervalued or overvalued perspective? Like one of the reasons we 0:20:58.119 --> 0:21:00.439 built the system we did on the flagship funds because 0:21:00.920 --> 0:21:03.760 that is an impossible number to peg um. You know, 0:21:03.760 --> 0:21:05.760 she's bit coined, be a million dollars or a thousand 0:21:05.800 --> 0:21:08.240 dollars or less, like no one really knows, and it's 0:21:08.240 --> 0:21:12.840 dependent on future IDIO seeing credit events involving the decisions 0:21:12.880 --> 0:21:15.400 by governments all around the globe. So it's extremely difficult 0:21:15.920 --> 0:21:19.080 to you know, put a number on that. Undervalued in 0:21:19.200 --> 0:21:22.200 the sense that I think people are writing off DeFi 0:21:22.359 --> 0:21:24.760 after the last year year and a half because of 0:21:24.920 --> 0:21:27.520 the blow ups and the collapses and the amount of 0:21:27.560 --> 0:21:30.920 money that has been lost is where things are undervalued. Um. 0:21:30.960 --> 0:21:35.280 You know, these systems are in therifancy, they're not user friendly, 0:21:36.040 --> 0:21:39.560 but if those problems get solved, you know, there's a 0:21:39.600 --> 0:21:43.000 ton of value in removing intermediaries and creating a more 0:21:43.080 --> 0:21:46.879 frictionless um you know, financial system. And again, you know, 0:21:46.920 --> 0:21:49.080 this goes back to discovering this when I was in Iraq. Like, 0:21:49.119 --> 0:21:51.840 this means a lot more to somebody in Africa or 0:21:51.840 --> 0:21:53.359 the Middle East or other parts of the world, and 0:21:53.400 --> 0:21:55.119 it does to us sitting in America, Like, we're not 0:21:55.160 --> 0:21:58.600 I'm not particularly concerned about my bank going to zero 0:21:58.640 --> 0:22:01.320 dollars and stealing my money or the US government, you know, 0:22:01.440 --> 0:22:04.280 collapsing in the next five or ten years. But that 0:22:04.400 --> 0:22:08.080 is a really real concern for many people around the globe. 0:22:09.200 --> 0:22:11.320 What about all coins, because I think you guys also 0:22:11.440 --> 0:22:16.560